Who would contend that a high-dollar collection of rare coins, stamps or other collectibles was of such a nature that it was not subject to homeowners policy special limits for the class of personal property involved? Answer: an insured who did not have scheduled property coverage for a carefully developed collection and incurred a substantial financial loss.
The potential for such an unhappy situation is another incentive for insurance providers to become thoroughly familiar with the special limits in policies that they arrange, and to make additional coverage recommendations when appropriate. A case in point, involving a valuable coin collection, was decided by a Florida appeal court in 2000.
A homeowners policy was written with an insurance limit of $107,250 for unscheduled personal property (Coverage C). After the insureds' home was burglarized, they submitted a claim that included the loss of rare coins worth more than $45,000. The insurer offered $200 for the coin loss, based on the policy's special limit of liability of $200 for money, coins, bank notes and medals.
The insureds responded with a lawsuit against the insurer for breach of contract. They contended that the coins were rare collector's items that did not conform to the objects described in the special limit that was invoked. The insurer's motion for summary judgment resulted in a trial court finding that the policy language was clear--judgment for the insurer. The insureds appealed.
On appeal, the insureds argued that the policy's special limits of liability section was ambiguous because the language was confusing. It was their contention that the reference to coins was unclear as to whether it meant a medium of exchange in transactions or items in a collection. The special limit of liability would not apply to the loss for which claim had been made if the first interpretation or definition governed.
The appeal court found that the pertinent policy language was clear and that it did not lead to a distinction regarding coins. The trial court decision was affirmed in favor of the insurer. (Bryant H. Walker et ux., Appellants v. State Farm Fire and Casualty Company, Appellee. Florida District Court of Appeal. No. 4D99-0712. April 19, 2000.) Detailed information on this case can be found at Commerce Clearing House 2000 Fire and Casualty Cases, paragraph 6695.
Coins and paper money collections are definitely subject to a special limit. Therefore, an entire collection is covered only up to $200 (or other specified limit) under Coverage C. This sum is woefully insufficient for substantial collections. The specified limit is adequate in most situations for the "spendable" money that people keep on hand; and when appropriate, it may be increased for additional premium. A significant collection, however, is a different proposition.
A scheduled personal property endorsement to a homeowners policy or a separate personal articles floater policy covers a collection of coins, paper money and other numismatic property for its full appraised value. Furthermore, such insurance is written to cover (all) risks of direct physical loss except a limited number that are excluded. (In the absence of such insurance, it is best to place a collection in a bank safe deposit box.)
Stamps, which have both postal use value and collection value and provoke similar questions, are another class to which a sub-limit of liability applies. For example, it is currently $1,500 in ISO and AAIS homeowners forms.
Stamp collecting has become an enormously popular hobby for people of all ages, and an important investment vehicle for serious collectors. Collecting is encouraged and supported by the Post Office Department. The same considerations that are suggested for coin and paper money collections apply to insurance for valuable stamp collections. Scheduling not only provides the requisite amount of insurance but also expands coverage to include additional perils to which a collection is subject.
There are 10 or 11 classes of personal property for which special limits of liability have been fixed under unscheduled personal property coverage (Coverage C). Because of the increasing popularity of collecting, it is important to become familiar with them and to check with insureds periodically to see if they have started a collection. Several of the classes include a substantial list of related items. The governing sub-limit could prove to be inadequate if numerous high-value items were to be lost in a fire or burglary.
A personal property replacement cost endorsement is a valuable addition to the basic protection provided by a homeowners policy. But its limitations are clear regarding valuable items. For example, such endorsements do not in general apply to property that is of rare quality or that possesses artistic merit: paintings, etchings, pictures, tapestries, art glass windows, valuable rugs, statuary, marbles, bronzes, antique furniture, rare books, antique silver, manuscripts, porcelains, rare glass or bric-a-brac, for example. Additionally, the provisions of a replacement cost endorsement are not applicable to memorabilia, souvenirs, collectors items or similar property that is valuable because of its age or history.
No longer is the need for scheduling confined to the traditional world of jewelry, furs, paintings, valuable rugs, etc. Baseball cards are not collectibles that are restricted to kids. They are one of many items that have blossomed into a high-dollar trading activity among adults. Based on appraisals and bills of sale, the new breed of collectibles can represent a significant exposure.
There is a logical explanation for special limits of liability applying to the 10 or 11 classes of valuable property in homeowners policies. Generally, small, the considerable exposure to loss that they represent should not be shared with the bulk of policyholders who do not have such property. The need for special insurance is clear. With this in mind, the scheduling of such property for its full value against a broad array of additional perils is a sound prescription. *